It pertains to a loan with a fixed amount taken from a bank or a private lender for a stipulated period of time. The above loan is paid back in easy installments, or EMI's over a duration of time along with interest at a rate that may vary from bank to bank and from borrower to borrower. A person can obtain term loans both at a fixed rate or a floating rate of interest. The loan is usually granted for a tenure of one year to five years and is used mainly for business purposes. There may be an increase in tenure up to thirty years for a term loan borrowed for buying residential accommodation and cases falling under the infrastructure sector. Based on the period, the interest rate and miscellaneous charges are aggregated and the calculated amount has to be paid back.
Based on the period of repayment, a term loan is classified into two main categories
These loans are utilized for a variety of business objectives. A business owner can use it in making advancement or improvements in his business. It is obtained to buy modern machines to increase profits, manage the cash crunch during critical times by way of a corporate loan. Other than this, it can be used for buying an office or other fixed assets to expand the business.
One can obtain personal loans for various purposes, such as housing, gold, education etc.
The business entities such as salaried professionals, craftsperson, entrepreneurs, private and public corporations, Non-profit organizations, etc. can borrow term loans.
A loan of this type is accepted under two categories
The interest rate on this category of loans varies from bank to bank and borrower to borrower. One can avail the loan on various rates of interest depending upon your credit rating and nature of the product being offered by the public/private sector bank.Having an excellent Cibil score also plays a vital role in getting a lower rate of interest. Other than this, the lender's profile is also equally important in deciding the rate of interest. Previous borrowing and payback history also influence the factor of whether a loan can be granted to you or not.
Borrowing a personal term loan has become easier these days in all banks due to technology One can fill out the form online and check their eligibility for a loan. While filling the form, the id proof and other documentation must be kept handy to save your time. If you have a high credit score, you can easily avail a loan from any financial organization. As a borrower one must keep in mind to use the borrowed money wisely to pay it back on time to avoid any hassles/legal proceedings. It would also make it easier for you to get a loan the next time you need it. You can use it to build your assets and pay back easily without breaking your savings.